Rupee remittances restart

Indian currency witnessed high fluctuations

By

VM Sathish

PublishedThursday, November 25, 2010

Rupee weakening is a temporary phenomenon. (REUTERS)

Investment remittances to India have started picking up with the exchange rate of the Indian rupee against the UAE dirham rising to Rs12.39 per dirham on Thursday from a low of Rs12 a couple of months ago.

Many non-resident Indians (NRIs) have been holding back their remittances waiting for the rupee to weaken.
The Indian currency which was gaining strength during the past couple of months started easing with the dollar-rupee exchange rate fluctuating by 40 paise in three days.

The Indian currency started weakening and on Wednesday the political tensions in North and South Korea affected most Asian currency values. Traders said the rupee, which declined to a two-month low in the previous session, would find support as Indian exporters cash in their dollars. On Thursday morning, the rupee was at 45.88/18 per dollar, compared with Wednesday close of 45.65/66. On Tuesday the rupee fell to 45.67/50, its lowest since September 23.

Sources in the money exchange business said the remittances from the UAE during Diwali and Eid were considerably lower than previous years because of the low exchange rate.

Not all subscribe to the view that the rupee will weaken further.

Sudhir Kumar Shetty, Chief Operating Officer of UAE Exchange, sees the rupee weakening as a short term trend because the foreign institutional Investors and investors are booking year-end profit by selling their shares in the Indian stock market.

"The rupee weakening is seen as a temporary phenomenon and by January there is every reason for the Indian currency to strengthen. This is only a temporary phenomenon because the FIIs are booking profit in November December period,” he said.

Remittances in the post-Eid season are normally low as people send extra money to their homes during Diwali and Eid. "Post-Eid remittance trend is always quiet," Shetty said.

“Indian stock markets have been on a correction mode. Investors have got double benefits due to weakened currency and decline in share prices. We have seen many NRI investors sending money for investment. Now there is a shift in investment from gold to equity and many NRIs will remit money,” said Sajith Kumar PK, CEO of JRG International Brokerage, which runs a Global Cash Management and Transfer Systems with the UAE Exchange.

“Many exchange houses which remit money to India through us have reported sharp fall in remittance in the past three months and even during Diwali period, the flow was weak. Now that the Indian rupee has lost more than 40 paise within a span of three days, NRIs who are holding back their deposits here will start remittances again. A difference of four to five paisa per dollar is considerable,” said Joseph Thomas, chief Representative, IndusInd Bank.

He said if the rupee-dirham exchange rate stabilizes at Rs12.50 per dirham, the remittance trend will reverse.
People send money for household expenses back home and some even preferred to borrow money in India and retained their dirhams in the UAE waiting for the currency to weaken. “I have not sent money home in the past three months because the rupee has strengthened considerably. From Rs13 per dirham the rates came down to less than Rs12.

Instead of sending money from here, my family borrowed money in India,” said Mohammed Ismail an Indian businessman.
Selvarajan N, Manager, Citi Exchange, Ajman Branch, said the rupee weakening may help remittance by salaried people. “It is month-end and if the trend continues, it will benefit the normal NRI remittances. On Wednesday, the rate for Rs1,000 is Dh81.25. It had gone up to Dh83.90 when the rupee strengthened against the dollar.”